Correlation Between Willamette Valley and American Copper

Can any of the company-specific risk be diversified away by investing in both Willamette Valley and American Copper at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Willamette Valley and American Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Willamette Valley Vineyards and American Copper Development, you can compare the effects of market volatilities on Willamette Valley and American Copper and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Willamette Valley with a short position of American Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and American Copper.

Diversification Opportunities for Willamette Valley and American Copper

0.12

Correlation Coefficient

Willamette Valley  American Copper

Average diversification

The 3 months correlation between Willamette and American is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and American Copper Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Copper Deve and Willamette Valley is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Willamette Valley Vineyards are associated (or correlated) with American Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Copper Deve has no effect on the direction of Willamette Valley i.e., Willamette Valley and American Copper go up and down completely randomly.

Pair Corralation between Willamette Valley and American Copper

Assuming the 90 days horizon Willamette Valley Vineyards is expected to under-perform the American Copper. But the preferred stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 6.71 times less risky than American Copper. The preferred stock trades about -0.01 of its potential returns per unit of risk. The American Copper Development is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20.00  in American Copper Development on October 11, 2024 and sell it today you would lose (17.72) from holding American Copper Development or give up 88.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.91%
Values	Daily Returns

Willamette Valley Vineyards  vs.  American Copper Development

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Willamette Valley is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

American Copper Deve

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Copper Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, American Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and American Copper

The main advantage of trading using opposite Willamette Valley and American Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley position performs unexpectedly, American Copper can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American Copper will offset losses from the drop in American Copper's long position.

The idea behind Willamette Valley Vineyards and American Copper Development pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.